Vietnam'S Textile And Garment Industry Will Be Even More Difficult In May. Orders Fell 70% Compared To The Same Period Last Year.

If the new crown pneumonia epidemic continues, many Vietnamese textile and garment enterprises will face difficulties, not only threatening the domestic economy of Vietnam, but also affecting the global clothing supply chain, including those brands that are deeply involved in Vietnam's supply chain, such as Zara and H&M.

According to the Nikkei news, the textile and garment industry in Vietnam is facing difficulties due to the sharp reduction in the number of orders due to the outbreak of the new crown pneumonia. Vietnam textile and Apparel Corporation said that if the epidemic continues, the company may consider stopping wages for 50 thousand workers.

If the new crown pneumonia epidemic continues, many Vietnamese textile and garment enterprises will face difficulties, not only threatening the domestic economy of Vietnam, but also affecting the global clothing supply chain, including those brands that are deeply involved in Vietnam's supply chain, such as Zara and H&M.

Vietnam's Ministry of industry and trade data showed that in April and May, Vietnam's textile and footwear orders fell by about 70% year-on-year. Even with the global epidemic eased at the end of May, Vinatex will still lose 1 trillion dong dong (about 42 million 400 thousand US dollars), which is two times of its 510 billion Vietnamese shield net profit in 2019.

It is worth mentioning that Vietnam's textile industry has also been greatly affected by the supply of raw materials. Vietnam's manufacturing industry seems to be a bit fragile under the epidemic. Vietnam is saying goodbye to the "fishing profits" brought about by the Sino US trade war.

The same is true. Many Chinese factories are transferring Vietnam to Vietnam with low tariffs and low cost. But in the past two years, the low cost of Vietnam's pride is gradually disappearing, and rents and labor wages are rising, especially the outbreak of the outbreak, which has led many investors to re-examine Vietnam's textile industry.

Under the impact of the epidemic

Vietnamese companies want to digest large amounts of inventory.

At present, the European and American countries have "closed the country to seal the city" in succession, the export transportation chain is almost interrupted, and the demand has shrunk dramatically. Under the heavy blow of Europe and America, the textile and garment factories in China and Vietnam are "saving themselves". After all, if we can survive in crisis, we will have the opportunity to wait until the end of the epidemic.

The way to save oneself is divided into two parts, one is to transfer the sales market, the other is to change production varieties. Two Some foreign trade manufacturers are lucky to turn round to receive bulk orders from Japan and Korea. Some traditional foreign trade manufacturers began to test the sales of water electricity suppliers and domestic live goods, and exported to domestic sales; others made use of the raw material advantages of garment factories to turn out antibacterial masks and personal protective clothing to support sales, and some manufacturers began to share orders and raw materials.

However, the impact of the epidemic on the economy and foreign exports is better than none. The overall consumer confidence is low and the consumption power is always limited. Take China as an example, according to the National Bureau of statistics, the total retail consumption in China dropped by 20.5% over the first two months of this year, and the consumption of clothing shoes and hats and needle textiles decreased by 30.9%. For Vietnam, where the volume of domestic demand is much smaller, it is even more difficult to digest large quantities of foreign trade stocks.

Can Vietnam's textile industry surpass China and become the world's factory after the outbreak? It seems not optimistic now. The main reason is that Vietnam's industrial chain is incomplete.

Raw materials are heavily dependent on China's imports.

Lack of dyeing and finishing process

In 2019, Vietnam's textile and clothing exports exceeded US $39 billion, and imports of raw materials amounted to US $22 billion 360 million.

Every year, Vietnam's imports of fabrics, fibers and raw materials from China account for 60%, 55% and 45% of imports respectively, so as to serve production. Although all enterprises are actively exploring other suppliers from India, Korea, Japan and other countries, the raw materials from the above market are not yet rich enough to meet small orders, and the price is higher than that imported from China.

It shows that Vietnam's textile and garment industry is heavily dependent on China's raw material supply market, reflecting the imbalance in the global value chain, because Vietnam mainly participates in the cutting and sewing process of OEM.

At present, Vietnam's textile and garment industry is in the low-lying area of the global textile and garment production. If we can ensure adequate supply of raw materials and enhance design links, the value will surely increase.

However, in addition to the difficulties in financing and the existing mechanism and policies being obstacles to development, other difficulties such as lack of human resources are still there. Many factories have invested a lot of money but failed because of the lack of high-quality human resources. It is understood that Vietnamese textile workers are only 80% of the Chinese workers.

From the perspective of enterprises, Bai Shenglong, vice president of Garment Company No. 10, said that environmental problems still impede the development of auxiliary industries in the textile and garment industry. He stressed that "never sacrificing the environment at the expense of economic growth" is the right proposition and the mainstream of the world today. However, precisely because of this, most areas do not welcome the textile and dyeing fields.

Gao You Xiao, vice president of Vinatex group, said that the bottleneck of the industry lies in the links of textile and dyeing. Investment in textile and dyeing and finishing is not a simple problem because it requires large investment funds and high-quality management cadres. On the other hand, when it comes to textile and dyeing projects, it has to face many risks and require long-term investment, and investment in line processing, sewing processing and other fields are low investment and quick returns. Therefore, many enterprises are not very interested in investing in the development of raw materials, especially when Vietnam is unable to compete with Chinese enterprises and foreign-funded enterprises in terms of price and scale.

Of course, apart from the shortcomings listed above, Vietnam's advantages are also very prominent. First of all, its low tariffs and low tax rates are its biggest competitive advantages, which is the biggest reason for many Chinese enterprises to invest in Vietnam. But in today's situation, Vietnam has a long way to go beyond China and become a "world factory". China's industrial chain is relatively intact, and it is also the first country to control the epidemic. At present, the domestic market is recovering in an orderly way. I believe that after this outbreak, the pressure of China's capital outflow will slow down.

At the same time, the rise of Vietnam in recent years is also accelerating the transformation and upgrading of China's textile industry. During this period, foreign trade enterprises should make preparations for some new product development, do some high-end products to increase customer stickiness, and domestic ordinary fabric enterprises also had better not put all the focus on the idea of low cost volume, because low prices are the easiest to get rid of. Under the crisis, who first got out of the mire of the epidemic and who first seized the opportunity of reconstructing the global industrial chain, who could divide the bigger cake after the epidemic ended.

The road is not easy to go, but also to prepare ahead of schedule.